As previously reported in Mirick O'Connell's Off the Clock Labor and Employment Law Blog, Judge Mazzant of the U.S. District Court for the Eastern District of Texas had enjoined the Department of Labor's Final Rule under the Fair Labor Standards Act that was slated to go into effect on December 1, 2016. The Final Rule, had it gone into effect, would have raised the minimum salary threshold for white collar exempt employees from $455 per week ($23,660 annually) to $913 per week ($47,476 annually).
Since Judge Mazzant's ruling in late November 2016, the legal challenge to the Final Rule continued in the form of a motion for summary judgment filed by the plaintiffs, Plano Chamber of Commerce and national business groups. In their motion, the plaintiffs sought to permanently invalidate the Final Rule as having been improperly issued by the Department of Labor. Specifically, the plaintiffs argued that the Department of Labor exceeded the authority granted to it by Congress when it more than doubled the salary threshold.
On August 31, 2017, Judge Mazzant agreed with the plaintiffs and permanently struck down the Final Rule. As a result of Judge Mazzant's ruling, the current salary threshold of $455 per week for white collar exempt employees will remain in effect for the foreseeable future. In its decision, the Court stated that "the Department [of Labor] does not have the authority to use a salary-level test that will effectively eliminate the duties test" for white collar exemptions. The Court found it troublesome that the Final Rule would reclassify over 4.2 million currently exempt employees to non-exempt employees without regard to an analysis of (or any change in) their job duties. Instead, the Final Rule's reclassification effect would be based solely on a change in the minimum salary threshold. As stated by the Court:
"Congress unambiguously directed the Department [of Labor] to exempt from overtime pay employees who perform 'bona fide executive, administrative, or professional capacity' duties. However, the Department creates a Final Rule that makes overtime status depend predominately on a minimum salary level, thereby supplanting an analysis of an employee's job duties."
The Court went on to state that the Final Rule was inconsistent with Congressional intent and was, therefore, "unlawful."
Another interesting aspect of the Court's opinion is found in a footnote where the Court referenced the following statement it made during oral argument:
"If [the salary level] had been just adjusted for inflation . . . we wouldn't be here today . . . because [the salary level] would still be operating more the way it has . . . as more of a floor."
The import of this statement is clear - the Court would find permissible an attempt by the Department of Labor to adjust the salary threshold in response to inflation.
The practical result of the Court's decision is that employers may continue to conduct business as usual with respect to their prior white collar classifications and may continue to rely on the $455 per week salary threshold. Employers must, however, ensure that employees are properly classified based on an analysis of their job duties.
Although it is difficult to predict future actions of the Department of Labor, it is likely that the Department will explore a much more modest increase to the salary threshold through future rulemaking efforts - possibly tied to inflation. Any such attempt, however, will take months, and perhaps years, to accomplish. It should also be noted that the Department of Labor may elect to file an appeal to the 5th Circuit Court of Appeals.
If you would like any assistance with respect to proper classification of employees under the Fair Labor Standards Act or any other labor and employment-related issue, please contact any of the attorneys within the Labor, Employment & Employee Benefits Group.